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Week Ending July 21, 2006

H.R.4019 To amend title 4 of the United States Code to clarify the treatment of self-employment for purposes of the limitation on State taxation of retirement income.

Federal law prohibits States from taxing retirement incomes of former residents and nonresidents who earned money in the State. The bill extends that prohibition to disallow taxing retirement income paid to a former or non-resident by a partner as a result of a written plan, program or arrangement in effect when the retirement began. The payments protected from taxes must be spread out over ten years and must be received by the pensioner in ‘substantially equal periodic payments.

The bill, if enacted, would apply to retirement income received after December 31, 1995.

Adjustments to retirement payments under pension or deferred payment plans and cost of living adjustments will not disqualify retirement plans from the tax break.

Sponsor: Rep. Chris Cannon (R-UT-3^rd)

Vote: Passed House by voice vote July 17, 2006

Cost to the taxpayers: “CBO estimates that enacting this bill would result in an increase in federal income taxes of less than $500,000 per year, totaling about $1 million over the 2007-2016 period. CBO estimates that H.R. 4019 would have no significant impact on federal spending.”

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